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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - March 2014 Decisions

IAG Gets Approval To Buy Lumley Insurance

A busier month at the OIO. Firstly in further consolidation of the New Zealand insurance market post Christchurch earthquakes, Insurance Australia Group Limited Australian Public (99.4%) and various overseas persons (0.6%) received approval for the acquisition of rights or interests in up to 100% of the shares of Lumley General Insurance (N.Z.) Limited, the consideration of which exceeds $100m. The vendor was Wesfarmers Limited Australia (100%); consideration was $374,779,541.

The OIO states: "Lumley General Insurance (NZ) Limited (Lumley) is a provider of general insurance products and services. Lumley writes all major classes of general insurance and has particularly strong expertise in the transport sector. The Applicant considers Lumley's diverse range of commercial and personal lines offerings and its strong history of expertise in the transport sector are a strong fit with the Applicant's existing New Zealand insurance business".

Readers may recall that IAG grabbed AMI Insurance (but not its Christchurch losses) from the Government, who in turn had bailed out AMI after the Canterbury earthquakes of 2010 and 2011. See our February 2012 commentary for details of IAG's purchase of AMI Insurance. Catherine Harris at Stuff.co.nz (7/5/14) summarised concerns about this latest deal to buy Lumley, concerns which were eventually ignored by various regulatory bodies on both sides of the Tasman.

"The country's biggest insurance player, IAG, is poised to grab a large chunk of the New Zealand market after being cleared to acquire the third largest firm, Lumley General (NZ). The Commerce Commission has approved the acquisition, which is part of a wider purchase by IAG's Australian parent of the Australasian underwriting business of Wesfarmers, Lumley's parent. In New Zealand, Wesfarmers would retain ownership of industry short-term financier Lumley Finance and insurance broker Crombie Lockwood.

"The deal has been criticised by the Insurance Brokers Association, which told the Commission it feared there would be less competition, and also that some businesses would no longer be able to get full insurance cover. Both IAG (NZ) Holdings and Lumley compete in personal and commercial insurance, though Lumley sells insurance through intermediaries such as banks and brokers. IAG supplies most of its products through the State, AMI and NZI brands.

"In its submission, IAG argued the merged entity would still face considerable competition from large, existing competitors, smaller players and retail banks. There was also a 'significant degree' of competition from overseas for larger commercial insurance contracts. In reply, Suncorp, parent of the country's second biggest insurer Vero, warned that IAG's market share in some insurance categories would rise to more than 60%. IAG would also end up with partnerships with three of the four main banks, underwriting insurance offered by the banks to bank customers, it added.

"However, in its decision today, the Commission said it was confident the deal would not change the ability of customers to shop around, as other companies would be able to expand to replace Lumley's position. Lumley's presence in personal home, contents and motor vehicle insurance was small, and the three main providers IAG, Vero, and Tower, would continue to operate in New Zealand in addition to others providing general insurance products.

"Lumley's presence was larger in commercial insurance, but again a number of providers would continue to operate including Vero, QBE, Zurich, Allianz, AIG, ACE and others. Commission Chairman Dr Mark Berry said IAG would still need to compete with other insurers on price and quality. 'By their nature all mergers create a larger company with a greater market share', he said. 'However, that does not mean that a substantial lessening of competition in the market naturally follows. In this case the Commission is satisfied competition remains'".

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Sealord Gets Retrospective Consent For Port Nelson Land

Sealord Group Limited Te Ohu Kai Moana (TOKM), New Zealand (50%) and Nippon Suisan Kaisha Limited (Nissui), Japan (50%) received approval for acquisition of, or control over, leasehold interests (including any rights of renewals) in up to approximately four ha of land located at or adjacent to Vickerman Street and/or McKellar Quay, Port Nelson, Nelson ("the Land") from 24 January 2001. The vendor was Port Nelson Limited New Zealand (100%); annual rent is $490,950.

The OIO states: "Following Nissui's investment in the Applicant, the Applicant became aware that an additional consent for the Applicant's leasehold interests in relation to the Land was required. Therefore, the Applicant seeks consent for leases relating to its seafood processing site located on the Land. The Applicant claims that the site is integral to the Applicant's focus on export growth".

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American Biotech Buys Edendale Nursery

ArborGen New Zealand Unlimited MeadWestvaco Corporation, United States of America (33.3%), International Paper Company, United States of America (33.3%) and Rubicon Limited, (33.4%) which is ultimately owned by interests from the United States of America (87.9%) and New Zealand (12.1%) received approval for the acquisition of a leasehold interest in approximately 95.3 hectares of land at 41 Hilda Road, Edendale, Southland ("the Land"). The vendor was Edendale Nursery (Southland) Limited New Zealand (100%); annual rent is $159,000.

The OIO states: "The Applicant is a forestry biotechnology company which breeds, grows and supplies tree seedlings to forest owners in New Zealand. In addition to the leasehold interest, the Applicant is acquiring Edendale Nursery which is located on the Land. The acquisition of Edendale Nursery will enable the Applicant to introduce elite products to customers in the Southland and Otago regions". For further details on Arborgen and its acquisitions and owners, see our commentaries for May 2004, February 2005 and October 2007.

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Mid Canterbury Farms Sold Overseas

Craigmore Farming NZ Limited Partnership various overseas persons (39%), United Kingdom Public (34%), Hong Kong Public (17%) and New Zealand (10%) received approval for the acquisition of rights or interests in 88% of the shares of Triberry Limited which directly or indirectly owns or controls:

• a freehold interest in approximately 256 hectares of land located at 360 & 477 Sowerby Rd, Geraldine (Ardwell Farm); and
• a freehold interest in approximately 275 hectares of land located at 1613 Arundel Rakaia Gorge Rd, Mayfield (Cairndale Farm).

The vendor was AM Berry Limited New Zealand (100%). Consideration was "withheld under section 9(2)(b)(ii) of the Official Information Act". The OIO states: "The Applicant intends to operate and develop the existing dairy farm businesses carried out on the land in association with the Vendor which will retain a 12% shareholding in Triberry Limited". See our previous commentaries in June 2012, February 2013, March 2013 and November 2013 for background on Craigmore Farming and its other land purchases here.

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Z Energy To Establish Biodiesel Project At Wiri

Z Energy Limited New Zealand Public (36.6%), other shareholders in Z Energy Limited, various (22.8%), Guardians of New Zealand Superannuation (20%), Australian Public (15.7%), various overseas persons (2.4%) and Utilico Limited, United Kingdom (2.4%) received approval for the acquisition of a leasehold interest in approximately 0.8 hectares of land at Wiri. The vendor was PFI Property Limited New Zealand Public (98%), various overseas persons (1%) and Australian Public (1%); consideration was "withheld under section 9(2)(b)(ii) of the Official Information Act".

The OIO states: "Z has established a dedicated team to explore renewable transport energy solutions. One of the solutions being explored is the Z Biodiesel Project and the land has been identified as the preferred location". Grant Bradley in the New Zealand Herald (4/4/14) reports further: "Z Energy is banking on biodiesel users paying a premium for the fuel it plans to produce at an Auckland plant using animal fat. The fuel company plans to spend $21 million on a biodiesel plant at Wiri that would process tallow from the meat industry.

"The plant will produce 20 million litres of biodiesel a year which can be blended with traditional mineral diesel. Although that's just a fraction of the billion litres of diesel the company sells a year, Z could double biodiesel output if the venture proves successful. Chief Executive Mike Bennetts said the biodiesel - to be blended with traditional mineral fuel - would cost up to 2c more a litre. 'For the plant to be economic all the way through it's probably 1c to 2c a litre more but that's just about 1 per cent that people pay at the pump'. Bennetts said Government subsidies worth about 2c a litre of biodiesel had been phased out about 18 months ago and the economics of biofuel remained challenging. 'We appreciate that others have tried and failed to bring domestically produced biodiesel at this sort of scale to the New Zealand market'.

"Z Energy had refined and investigated the plan rigorously over the past four years, was not trying to grow a feedstock supply and the core of its business was in distribution and marketing, he said. Tallow would be secured with long term contracts which would minimise price fluctuations. The price of tallow varies on international markets depending on demand from the soap and candle-making industries. Z said its biodiesel would satisfy the highest New Zealand and European fuel specifications.

"Bennetts said it had spoken to commercial customers who had expressed commitments to take initial production. 'We expect strong customer support for a high quality, genuinely sustainable biodiesel and indeed our decision to proceed is at least partially based on these indications of support'. While Z was minimising risk through feedstock supply chain agreements, Bennetts said the success of the project would be determined by how much customers value 'a cleaner, more sustainable alternative'.

"Initial production would likely be allocated to commercial customers who would typically use the biodiesel in B5 to B20 (5 to 20% biodiesel to mineral diesel) blends in heavy vehicles but the company expected to also supply upper North Island retail sites with a B5 biodiesel blend. One notable biodiesel failure was Solid Energy's foray in 2007. The State-owned enterprise bought Canterbury Biodiesel, spent $17 million on a canola oil plant but sold the business last year (2013) after investing a reported $62 million. Bennetts said fuel was Z Energy's core business".

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Mud House Wineries Sold Overseas: Hong Kong Buys The Land

In two related OIO approvals QWIL Investments (NZ) Pty Limited (QWIL) Gold Rainbow Int'l Limited, Hong Kong (SAR) (45.3%), Trueway International Limited, Hong Kong (SAR) (22%), Triluck Assets Limited, Hong Kong (SAR) (7.5%), Hong Kong Public (25.2%) and various overseas persons (0.006%) and Accolade Wines New Zealand Limited (Accolade) United States (38%), Australia (19%), Netherlands (8%)' China (8%), various (27%) received approval for:

• the acquisition by QWIL of a freehold interest in five vineyards located in Marlborough (Woolshed Vineyard), Canterbury (Home, Mound and Deans Vineyards) and Otago (Claim Vineyard) comprising approximately 596 hectares; and
• the acquisition by Accolade of a leasehold interest in the five Vineyards being acquired by QWIL comprising approximately 596ha (along with approximately 15ha of land used for a café business).

The vendor for both transactions was Mud House Wine Group entities New Zealand Public (98.8%) and various (1.2%); consideration was $46,400,000 (freehold consideration). The OIO states: "The Applicants intend to continue to operate and develop the vineyards and various wine businesses related to the Land. The investment will enhance QWIL's existing investments in (and will provide Accolade Group with an entry into) the New Zealand wine industry".

Cathie Bell in the Marlborough Express (6/11/13) elaborates. "Marlborough wine company Mud House has agreed to sell its wine brands to an Australian company and its vineyards to a Hong Kong-based company. Accolade Wines bought Mud House Wine Group's labels - the Mud House, Waipara Hills, Dusky Sounds, Haymaker and Skyleaf brands - while the company's roughly 400 hectares of vineyards were bought by CK Life Sciences. Mud House Group Chairman Bob Major said the sales were conditional on approval by shareholders and the Overseas Investment Office. Chief Executive MJ Loza would remain as the head of the New Zealand wine business. All employees associated with the assets being purchased by Accolade Wines would remain employed.

"Mr Major declined to say how much the brands and vineyards had sold for, saying the price was commercially sensitive. 'But it was a price all parties are satisfied with'. Mud House had 400 hectares of vineyards: about 100ha in Marlborough, 200ha in Waipara, North Canterbury, and 100ha in Central Otago. Accolades Wines has leased those vineyards from CK Life Sciences, and would process its grapes at Mud House's winery in the Riverlands industrial estate.

"Mud House group has kept its other two businesses: New Zealand Wineries, and New Zealand Extracts, a biotech business which develops extracts from grapes. CK Life Sciences is linked to QWIL Investments, another Hong Kong-based company that bought 158ha of vineyard in Northbank for $16 million and has leased that to Treasury Wine Estates, which has the Matua label, for $26 million. Accolade Wines' General Manager for Australia and New Zealand, Michael East, said while the company's owners were based in Sydney, it was a global player with vineyards and brands in California, South Africa, and Australia. The company approached Mud House and Mr East said it was a good fit.

"It had a large business in the $7-$15 sector of the market, and was looking for premium assets in the $15-$50 sector. 'Whatever market it's trading in, New Zealand is at the premium end'. Mr East said the company saw the purchase as a strategic move with the new brands forming a key part of its global portfolio strategy. 'The brands are well-known enough but afford us an opportunity. We can expose them fairly quickly to a lot more markets'. Accolade Wines own the Hardys and Banrock Station labels".

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Thermo Fisher Divests Recent Cell Culture Acquisition

General Electric Company United States of America (100%) received approval for the acquisition of rights or interests in up to 100% of the shares of GMC Consolidation LLC which owns or controls a freehold interest in approximately 24.8 hectares of land at 1137 SH2 Whakamarama, Tauranga. The vendor was Thermo Fisher Scientific Inc. United States of America (100%); asset value was $2,049,000. The OIO states: "On 8 October 2013 Thermo Fisher Scientific Inc. (TFS) received consent to acquire Life Technologies Corporation as part of a global merger. This investment required regulatory approval in multiple jurisdictions including New Zealand.

"TFS is required to divest its global cell culture business under commitments given to competition authorities. The divestment includes TFS' foetal bovine serum business in New Zealand (which owns approximately 25 hectares of sensitive land in Tauranga). The Applicant who already has a significant presence in the healthcare industry in New Zealand and employs approximately 600 people intends to acquire the assets". See our October 2013 commentary for details of Thermo Fisher's purchase of Life Technologies.

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Swiss Buy Southland Dairy Farm

Dynamic Asset Management Company (Luxembourg) SA on behalf of DMC Fund FCP SIF - Agriculture Real Assets Sub Fund Switzerland (100%) received approval for the acquisition of a freehold interest in approximately 408.9 hectares of land at 196 Te Tipua Valley Road, Gore. The vendor was Delamare Farms Limited Gerardus Cornelis Van't Klooster, Hermina Alida Maria Van't Klooster, Alan Bruce Candy, New Zealand (73%) and Gerrit Jan Bos, Gerritdina Geertruida Bos, New Zealand (27%); consideration was $12,900,000. The OIO states: "The Applicant intends to intensify the use of the farm by converting from a self-contained dairy farm to a milking platform".

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Other March Decisions

John Graham Bishop & Barbara Susan Bishop United Kingdom (100%) received approval for the acquisition of a freehold interest in approximately 9.9 hectares of land at 328 Gladstone Road, Dunedin. The vendor was Catherine Margaret Butson New Zealand (100%); consideration was $1,000,000. The OIO states: "The Applicants who intend to migrate to New Zealand and become New Zealand residents are acquiring the property to use as their primary residence and to run a bed and breakfast business".

John Michael Dierking & Lisa Marino Dierking as Trustees of The Dierking Trust United States of America (100%) received approval for the acquisition of a freehold interest in approximately 8.2 hectares of land at Gibbston Back Road, Queenstown. The vendor was Dean Stevinson NZ Ventures LLC Dean Michael Stevinson, United States of America (100%); consideration was $715,000. The OIO states: "The Applicant is acquiring the land in order to grow grapes and undertake associated viticulture activities".

Rohit Malhotra and Tihunaz Mehta India (100%) received approval for the acquisition of a freehold interest in 7.3 hectares of land at 106 Manawaora Road, Dicks Bay, Russell. The vendor was Kevin Hopping, Cheryll Hopping and KCH Trustees Company Limited as trustees of the KD and CA Hopping Family Trust New Zealand (100%); consideration was $1,430,000. The OIO states: "The Applicants intend to implement a pest control programme on the property and to make a series of donations to the Guardians of the Bay of Islands Inc., which coordinates Project Island Song (an ecological restoration project) in the eastern Bay of Islands".

Paul James Tranter & Anna Christine Tranter United Kingdom (100%) received approval for the acquisition of a freehold interest in 14 hectares of land at 300 Pomona Road, Ruby Bay, Mapua. The vendor was Michael James William Skilling New Zealand (100%); consideration was $1,400,000. The Tranters already reside in New Zealand and intend to apply for permanent residency.

And finally for March, Rangitikei Aggregates Limited New Zealand Public (66%) and various overseas persons (34%) received approval for acquisition of a freehold interest in up to approximately 182 hectares of land located at Onepuhi Road, Marton. The vendor was the trustees of The Bridgend Trust New Zealand (100%); consideration was $3,600,000. The OIO states: "The Applicant is acquiring the Land in order to extract gravel required for its gravel extraction and distribution business. The Vendor will lease back and continue to farm the majority of the Land".

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